Discussion in 'Index Futures' started by Ditch, May 24, 2002.
Back off Tri! I gave him that nickname!
Thanks for the tip on the indicator stocks, Savage-Yoda. I just started trading NQ this week, not particularly successfully but I knew it was going to be tough with the low volume. I've been using the QQQ, SMH and TXX as indicators, but I think those stocks you mentioned could be a little more precise for trying to scalp.
I've been looking at the daily range of the ES because i'm trying to find a way to trade it better. Here are my observations:
Last 24 days(removing the largest range & the smallest range)
Average daily range: 17pts
Range is between 12-20pts 85% of the time
Median is 16pts
My question is: Does anybody look at where the ES is trading in relation to the daily range when entering a trade?
For example, if it's 2pm and ES is down 20pts, do you start looking to go long based on statistical range data?
I'm interested in any thoughts out there.
For those trading the NQ, look at the 5 day intraday chart of the SOXX vs. Nasdaq 100. A large divergence has developed over the last 2 days. Interesting.
Heres how i figure based on IB's margin rates
Initial Daytrading Margin for NQ = 1500 ES = 1969
So if you have 6k you can buy 4 NQ contracts or 3 ES contracts
So to figure out how much you would make on your given day:
NQ = 4 (contracts) x 52 (points) x 20 ($per point) = $4160
ES = 3(contracts) x 25(points) x 50($per point) = $3750
Not much of a big difference with this example.
However, i don't think the example you gave of 52 to 25 points is accurate in determining this... I glanced at some of the numbers and I think the avg ratio is more like 50/18. And that would yeild a much higher NQ return. Anyone know where I can get the Avg Daily Range on the futures? (without doing it myself)
Then we could know exactly.
I find Market Profile very useful in determining the daily range and potential extensions or reversals. If you're interested Mind over Markets by james Dalton provides a good introduction. Investor/RT provides very good Market Profile charts without additional costs.
I pay attention to the range throughout the day. It is one of the indicators that I use. I know from empirical observation how far it typically carries by like 11:00/11:30 EST. I also keep an eye on the average daily range to get an indication of how far it may carry and probabilities for the move continuing. The averages gradually shift over time so the most recent data (say last 20 days' average) is most valuable.
A possible scenario to explain how I might trade it follows. Let's say the market is trending down and I'm short. It is 1:00 EST. The current day's range is 11 points and the avarage is 17 points. I might take 95% of the average range as my target or about 16 pt range. I can create a risk reward scenario of about 2.5 to 1 assuming there is a 50% chance of 2 pt rise and a 50% chance it gets to a 16 pt range.
Of course this example is talking about longer timeframe trading and not scalping. Conversely when the range is 15.5 and it is having problems making new lows as evidenced by how much it takes out the intraday low each time it makes an attempt, I might say the risk reward picture is not good enough to warrant a short entry. This doesn't mean that the range won't extend beyond 15.5 but the probabilities in this case are not very favorable. If it were still having no problems extending out the low whenever it attempted it, you might not draw the same conclusion in the previous sentence.
It is a tool, one of many that can be used in ANY market to help define good risk/reward plays. I would never use a 20pt range alone in a vacuum to tell me to go long because we have exceeded the average range. Who is to say that the current day won't go to a 25 pt range or 30?
I also track the daily range, and average them over the last 20 days or so.
Almost all markets swing/cycle from contraction (indecision) to expansion (rapid move to a new level).
It helps to be aware of narrow range days, i.e., inside days and Tony Crabel/LBR NR7's (narrowest range of the last 7 days). Watch for expansion moves after a contraction, and don't fade a high volume active thrust out of a narrow day or series of narrow days.
I'm always cognizant of when the range seems a little meaty in a given hourly bracket. However I try to keep in the back of my mind that on any given day ES can move 50 or even 75 points. If fading volatility was a means to an end, then one should just sell options. At least you get paid a premium for standing in front of a frieght train.
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